February 20, 2019

A former Papua New Guinea official has warned the Paladin scandal is undermining Australia’s efforts to stamp out corruption in the Pacific nation.

Paul Flanagan, a former Australian treasury bureaucrat who worked as a senior adviser to the PNG government, said news of the Paladin affair had spread quickly through the nation’s parliament, where it had become a “hot issue”.

The scandal was painting Australia’s efforts to strengthen anti-corruption measures and improve procurement standards as hypocritical, he said.

“Any sense of hypocrisy totally undermines the ability for those who are trying to implement positive change,” Flanagan said.

“Whether it be here, or whether it be other examples of some of the discretionary grants, I just hear from some of those leading bureaucrats as well as parliamentarians, they just love quoting back how Australia doesn’t live up to its own standards and the standards they’re asking PNG to step up to.”

The fallout from the Paladin affair has continued to build pressure on the Australian government this week. The PNG prime minister, Peter O’Neill, issued a statement placing blame for the handling of the $423m contract squarely at Australia’s feet. PNG MP and former prime minister, Sir Mereke Mourata, went further, saying it appeared the contract was being used “as a way to peddle influence” and demanded Australia explain itself.

“At the very least it should explain why its usual procurement systems and processes have been abused or bypassed and why all the secrecy and spin,” he said.

Jonathan Pryke, the director of the Lowy Institute’s Pacific Islands programme, suggested there were double standards at play for overseas government funds.

“What shocks me is that an aid programme 1% the size of this [Paladin contract] would go under far more scrutiny, every cent would be accounted for,” he told Guardian Australia.

“The sheer quantum of money that is not accounted for demands close scrutiny.”

Paladin, a little-known and inexperienced security firm, was handed the $423 million (US$303 million) Manus Island contract through a limited tender process with no other bidders. The approval sparked a standoff with the Manus-based Kingfisher security firm over the lack of local employment.

The contract was awarded despite evidence in the federal court from its former chief executive, Craig Coleman, that it was unprepared for a contract of that size.

One of the company’s subsidiaries was registered to a beach shack on Kangaroo Island, until recently.

Asylum seekers on the island have told Guardian Australia the Paladin employees, who are poorly paid locals, do “nothing” on the island, aside from check IDs.

“This has raised a lot of questions in terms of the bilateral relationship between Australia and PNG,” said Arianne Kassman, executive director of Transparency International PNG.

“Having transparency should be paramount in any bilateral partnership. And deals like the $423m with Paladin is concerning… for the taxpayers of Australia.”

Kassman said the public needed an explanation about “how deals like this are being allowed to take place’”.

The PNG opposition leader, Patrick Pruaitch, said the PNG government had acted “in good faith” in allowing Australia to set up its detention centre “as a temporary solution and as a deterrent to other refugees” considering travelling there by boat.

Pruaitch said the Paladin scandal highlighted the “callous way the offshore refugee situation is being treated”.

“The Australian government has shown scant regard for the local and national problems created in PNG by the ongoing refugee crisis. By its actions it has also shown scant regard for the plight of these refugees, a stance that has been condemned by the United Nations,” he said.

An auditor general’s report has previously found the department of home affairs had failed to properly manage contracts for its offshore detention system. Guardian Australia this week revealed that a second contractor, Canstruct, was also handed a major offshore contract on Nauru in similar circumstances. The tender was limited to a single bidder and Canstruct had little to no experience running garrison and welfare services in immigration detention.

In defending the Paladin contract, the department said it was working in difficult and urgent circumstances, which required a limited tender process. The department made a similar defence of its handling of the Canstruct contract.

Its secretary, Michael Pezzullo, said ideally he would have preferred a global search over 24 hours for the new Manus contractor.

Labor has since written to the auditor general, asking him to investigate. Labor’s shadow immigration minister, Shayne Neumann, said the audit was needed because “the level of expenditure associated with these contracts, the government’s poor track record, and the concerning reports and allegations related to the entities involved”.

Neumann noted that the department had approached Paladin Solutions Group “directly” and “Paladin Solutions Group only” offering a contract for provision of garrison support and welfare services in Papua New Guinea.